Pebble Beach Regulatory News (PEB)

14 Jan 2005 07:00

Vislink PLC14 January 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN 14 January 2005 Vislink plc Proposed Acquisition of Link Research LimitedProposed Placing and Open Offer of 20,414,569 New Ordinary Shares at 22.75 pence per share on the basis of 1 Open Offer Share for every 5 Existing Ordinary Shares to raise £4.6 million before expenses Vislink plc ("Vislink" or "the Company"), one of the leading suppliers ofmicrowave radio and satellite transmission products for the broadcast andsecurity markets and of CCTV systems for the marine security market, todayannounces that it is proposing to acquire Link Research Limited ("Link"), aleading provider of digital wireless camera systems for broadcast and broadcastsports markets, for a maximum potential consideration of £10.75 million. Vislink also announces today that is raising £4.6 million (before expenses) byway of a Placing and Open Offer, underwritten by Investec, which is acting asfinancial adviser and broker to the transaction. The Acquisition of Link and the Placing and Open Offer are both subject toshareholder approval. Highlights • Vislink will acquire the intellectual property rights for the application of the technologies that are used extensively throughout Vislink's new generation microwave radio links and satellite communications products • Vislink Group will therefore retain the royalties it currently pays on its product purchases from Link, on which Link enjoys a high margin • The Acquisition enhances Vislink's broadcast product portfolio through Link's current standard definition and planned high definition wireless camera systems • The combination of Vislink's and Link's development programmes is expected to generate new market opportunities in the broadcast and non-broadcast markets • Mr Len Mann continues as Link's Managing Director and will expand his role, becoming chief technical officer of the Vislink broadcast businesses • Vislink will pay a maximum potential consideration of £10.75 million comprising initial consideration of £5.0 million, payable on completion as to £3.0 million in New Ordinary Shares and £2.0 million in cash and Loan Notes, and further performance related deferred consideration of up to £5.75 million payable in Loan Notes and shares. • The Company is raising £4.6 million (before expenses) through an underwritten Placing and Open Offer to fund the initial consideration payable under the Acquisition, the costs of the Acquisition and the Placing and Open Offer, and to provide additional funds for the on-going product development programme and working capital of the Enlarged Group. - Open Offer of 20,414,569 Open Offer Shares at an Issue Price of 22.75 pence per share on the basis of 1 Open Offer Share for every 5 Existing Ordinary Shares - Gross proceeds of £4.6 million (£3.9 million after the expenses of the Acquisition and the Placing and Open Offer) - 7.1 per cent. discount to the closing mid price of 24.5 pence on 13 January 2005 Ian Scott-Gall, Chief Executive, commented: "The Acquisition of Link will yield benefits to Vislink of improved margins dueto the retention of royalties previously paid on OEM products supplied toVislink, the growing demand for Link's wireless camera systems and also thestrong trading performance of Link since the end of its last financial year. Inaddition the integration of Link's wireless camera systems within Vislink'sproduct offering and the development and introduction of high definitionwireless camera systems are expected to provide Link with opportunities forfurther growth" This summary should be read in conjunction with the full text of theannouncement included below. For further information, please contact Vislink plc Ian Scott-Gall, Chief Executive 01488 685500 James Trumper, Finance Director 01488 685500 Investec Investment Banking Patrick Robb / Michael Ansell 020 7597 5970 The making of the Open Offer to persons not resident in the United Kingdom orIreland or who are citizens of countries other than the United Kingdom orIreland may be affected by the laws or regulatory requirements of such relevantjurisdiction. This announcement does not constitute an invitation or offer topersons in territories other than the United Kingdom or Ireland unless in therelevant territory such an invitation or offer could lawfully be made to suchpersons without compliance with any registration or other legal or regulatoryrequirements other than any which may have been fulfilled. Investec Investment Banking, a division of Investec Bank (UK) Limited, which isauthorised and regulated by the Financial Services Authority and is a member ofthe London Stock Exchange, is acting exclusively for Vislink in connection withthe Proposals and is not acting for any person other than Vislink and will notbe responsible to any person other than Vislink for providing the protectionsafforded to its customers or for providing advice on the transactions andarrangements proposed in this announcement. Davy, which is regulated in Ireland by the Irish Financial Services RegulatoryAuthority is acting exclusively for Vislink in connection with the Proposals andis not acting for any person other than Vislink and will not be responsible toany person other than Vislink for providing the protections afforded to itscustomers or for providing advice on the transactions and arrangements proposedin this announcement. Introduction The Board is pleased to announce that it has entered into a conditionalagreement to acquire Link Research Limited for maximum potential considerationof £10.75 million, comprising an initial consideration of £5.0 million, to besatisfied on Completion by the payment of £2.0 million in cash and Loan Notesand the issue of £3.0 million in New Ordinary Shares, and further deferredconsideration of up to £5.75 million payable in Loan Notes and shares. The Board also announces that the Company proposes to raise approximately £4.6million gross by way of a Placing and Open Offer of 20,414,569 Open Offer Sharesat 22.75 pence per share, which has been fully underwritten by Investec Bank(UK) Limited ("Investec"). The proceeds of the Placing and Open Offer ofapproximately £4.6 million will be used principally to finance the initial cashconsideration payable under the Acquisition Agreement, the costs of theAcquisition and the Placing and Open Offer, and to provide additional funds forthe on-going product development programme and working capital of the EnlargedGroup. Prospectus and Extraordinary General Meeting Both the Acquisition of Link and the Placing and Open Offer are subject toshareholder approval. A circular, which comprises a prospectus ("Prospectus),setting out further details of on Link, the Acquisition and the Placing and OpenOffer and including a notice convening an Extraordinary General Meeting isexpected to be dispatched to shareholders later today. The EGM will take placeat 11.00 a.m on 9 February 2004 at Vislink plc, Marlborough House, CharnhamLane, Hungerford, Berks, RG17 0EY. Information on Link Link is a private company which designs, assembles and markets both its ownwireless camera systems and provides OEM products for Vislink and othercompanies to integrate into their own systems for the broadcast market. Since2001 Link has experienced significant growth and in 2003 it acquired the rightsto the application of the intellectual property rights for the compression andmodulation technology which is used in its own products and the digitalmicrowave radio and satellite products manufactured by Vislink, in particular.In the year ended 31 March 2004, sales to the Vislink Group accounted forapproximately 21 per cent of Link's sales. Features of Link's wireless camera system products include: lightweighttransmitters; a low signal delay compared with competing products which allowslive interviews without sound/vision delay problems; good compatibility withwired cameras; the option of reverse video feedback to the camera operator; andwireless camera controls. Link has just released a lower cost wireless camerasystem for less demanding broadcast applications. In addition, Link offers adiversity receiver package. Diversity is a system whereby multiple signals canbe received by two or more separate antennas with the system automatically anddynamically choosing the strongest signal thereby providing an almost continuousradio signal whilst the camera or transmitter is being moved to follow theaction being filmed. Link markets its products to television broadcasters through its distributionnetwork and has now developed market presence in Europe, Australasia, Africa andthe USA. The table below summarises the financial results of Link and its subsidiariesfor the year ended 31 March 2004. 31 March 2004 £'000 Turnover 4,767Operating profit 645Pre tax profits 593Net assets 997 The operating profit for the year ended 31 March 2004 is stated after theamortisation of goodwill amounting to £184,588 and, also, the total remunerationof the three directors of Link, including salaries, bonuses, benefits in kindand pension contributions in the year ended 31 March 2004 of £565,610. Furtherfinancial information on Link will be set out in the Prospectus. Under the proposed service contracts which will apply to these individualsfollowing the Acquisition, the maximum total annual remuneration of theseindividuals will be £355,860. Reasons for the Acquisition Through the Acquisition, Vislink will acquire intellectual property rights forthe application of the technologies that are used extensively through its newgeneration microwave radio links and satellite communications products. Following the Acquisition, the royalties currently paid to Link with eachpurchase by their broadcast businesses of OEM products from Link will beretained within the Enlarged Group. Link enjoys a high margin on these salesbecause the OEM purchase price includes a substantial royalty in addition tonormal production costs. The Acquisition would allow Vislink to standardise on Link's current standarddefinition and planned High Definition (HD) wireless camera systems within itsproduct range. This would bring a high profile application into its broadcastproducts portfolio. Vislink will also benefit from the inclusion of Link's development programmewithin its own overall development programmes. The Directors believe thatsignificant market opportunities could arise from the combination of the radiofrequency capability of MRC, the satellite uplink expertise of VislinkCommunications together with Link's compression and modulation and HighDefinition television skills, thereby increasing both the broadcast andnon-broadcast market opportunities for the Enlarged Group. To strengthen thedevelopment programmes it is anticipated that Link's managing director, LeonardMann, will both retain his role as Link's managing director and take on the roleof chief technology officer of the Vislink Group's broadcast businesses. Terms of the Acquisition The Company has conditionally agreed to acquire from the Vendors the whole ofthe issued share capital of Link for an initial consideration of £5.0 million,to be satisfied on Completion by the payment of £2.0 million in cash and LoanNotes and by the issue of 13,186,813 Initial Consideration Shares (the InitialConsideration Shares being valued at £3.0 million on the basis of the average ofthe closing middle market quotation of an Ordinary Share over the five businessdays up to and including 12 January 2005 of 22.75p). The maximum aggregateconsideration payable to the Vendors pursuant to the Acquisition Agreement is£10.75 million. The Initial Consideration Shares will be issued credited as fully paid and willrank pari passu in all respects with the Existing Ordinary Shares including theright to receive all dividends hereafter declared, made or paid, save for anydividend declared in respect of the financial year ended 31 December 2004 andexpected to be payable in July 2005. The Vendors shall be entitled to additional deferred consideration calculated asa sum equal to 70 per cent. of (i) sales of products by Link or its subsidiaryto the Vislink Group to include in its products or systems for sale to thirdparties (but excluding the sale of wireless camera systems by Link to any memberof the Vislink Group) and (ii) the product price of any products manufactured bythe Group which are subject to a royalty payment to Link, achieved in therelevant period up to a maximum amount of: • £1,500,000 in respect of the period from the day following Completion to 31 December 2005; • £1,750,000 in respect of the period from 1 January 2006 to 31 December 2006 (both dates inclusive); and • £2,500,000 in respect of the period from 1 January 2007 to 31 December 2007 (both dates inclusive). The deferred consideration is payable in either (i) in Loan Notes, or (ii) atVislink's option, up to the lower of half of such deferred consideration or £2.0million in New Ordinary Shares and the remainder in Loan Notes. The number ofFurther Consideration Shares to be issued (if any) shall be calculated on thebasis of a price per share equal to the average of the closing middle marketquotations of an Ordinary Share on each of the last five dealing daysimmediately preceding the date of allotment derived from the London StockExchange Daily Official List. The Acquisition Agreement is conditional, inter alia, upon shareholder approvaland admission of the Open Offer Shares and the Initial Consideration Shares tothe Official Lists and to the London Stock Exchange and the Irish Stock Exchangefor the admission to trading of the Open Offer Shares to their respectivemarkets for listed securities ("Admission") becoming effective by not later than11 February 2005 (or such later date, not later than 25 February 2005, as theCompany and Investec may agree). Details of the Placing and Open Offer The Company proposes to issue 20,414,569 Open Offer Shares by way of a Placingand Open Offer to raise £4.6 million before expenses. Investec has agreedconditionally to place 19,496,569 Open Offer Shares with institutionalinvestors. These Open Offer Shares have been conditionally placed subject torecall to satisfy valid applications by Qualifying Shareholders under the OpenOffer. In addition, Investec has received irrevocable undertakings fromDirectors of the Company to subscribe for 918,000 Open Offer Shares under theOpen Offer. Further details of these undertakings are set out below. The Placingand Open Offer has been underwritten in full by Investec. In order to provide Qualifying Shareholders with the opportunity to acquire OpenOffer Shares at the Issue Price, the Directors have arranged for Investec toinvite applications from Qualifying Shareholders for Open Offer Shares at theIssue Price. Qualifying Shareholders have a guaranteed minimum entitlement onthe following basis: 1 Open Offer Share for every 5 Existing Ordinary Shares registered in their name at the close of business on the Record Date and so onin proportion for any greater number of Existing Ordinary Shares so requested.Entitlements to apply for Offer Shares will be rounded down to the nearest wholenumber. Fractions of Open Offer Shares will be disregarded in the calculation ofthe Qualifying Shareholder's pro rata entitlement. An excess application facility has been put in place. Qualifying Shareholdersare able to apply for any whole number of Open Offer Shares in excess of, equalto or less than their pro rata entitlement. Excess applications will only besatisfied to the extent that corresponding applications by other QualifyingShareholders are not made or are made for less than their pro rata entitlements. The basic entitlement of a Qualifying Shareholder is indicated on theApplication Form. Application Forms are personal to Shareholders and may not betransferred except to satisfy bone fide market claims. The Open Offer Shares will, when issued and fully paid, rank pari passu in allrespects with the Existing Ordinary Shares, including the right to receive alldividends and other distributions hereafter declared. The Placing and Open Offer are conditional, inter alia, on shareholder approvaland on Admission becoming effective by not later than 8.00 a.m. on 11 February2005 (or such later date, not later than 8.00 a.m. on 25 February 2005, as theCompany and Investec may agree). New Ordinary Shares Application has been made to the UK Listing Authority and to the Irish StockExchange for the New Ordinary Shares to be admitted respectively to the OfficialLists and to the London Stock Exchange and the Irish Stock Exchange for theadmission to trading of the Open Offer Shares to their respective markets forlisted securities. Subject to the Open Offer becoming unconditional in allrespects, it is expected that Admission will become effective and that dealingsin the Open Offer Shares, fully paid, will commence on 11 February 2005. Intentions of Directors ALR Morton, IH Scott-Gall, JR Trumper and THS Trotter have each undertaken totake up their entitlements under the Open Offer, amounting to a total of 898,000Open Offer Shares, in full. A Finizio has undertaken to apply for Open OfferShares representing his entitlement under the Open Offer 10,000 Open OfferShares plus an additional 10,000 Open Offer Shares under the excess applicationfacility. Use of proceeds The proceeds of the Placing and Open Offer will be used to finance the £2.0million initial cash consideration payable under the Acquisition Agreement, thecosts of £0.75 million relating to the Placing and Open Offer and theAcquisition, and £1.9 million to provide additional funds for the on-goingproduct development programme and working capital of the Enlarged Group. Current trading and prospects Vislink The Board considers the interim announcement for the six months ended 30 June2004, released on 1 September 2004 reflects their current view of MRC andHernis, that is they will both perform to their expected levels in the fullyear, and the trading update announced on the 4 November 2004 continues toreflect the position of the UK business. Link Link is experiencing growing demand for its products across its geographicmarkets and has traded strongly since the end of its last financial year. Inparticular, demand has been strong for wireless camera systems in the US and forintegrated wireless camera systems in Australia. New products including theintroduction of HD wireless camera systems into the market are expected toprovide Link with opportunities for further growth. EXPECTED TIMETABLE OF PRINCIPAL EVENTS Record Date for the Open Offer 12 January 2005 Latest time and date for splitting Application forms (to satisfy bona fide 3.00 p.m. on 4 February 2005market claims only) Latest time and date for receipt of completed Application Forms and payment in 3.00 p.m. on 8 February 2005full under the Open Offer Latest time and date for receipt of Forms of Proxy for use at the 11 a.m. on 7 February 2005Extraordinary General Meeting Extraordinary General Meeting 11 a.m. on 9 February 2005 Admission and dealings commence on AIM 8.00 a.m. on 11 February 2005 Delivery in CREST of New Ordinary Shares to be held in uncertificated form 8.00 a.m. on 11 February 2005 Definitive share certificates in respect of the New Ordinary Shares despatched 15 February 2005not later than DEFINITIONS "Acquisition" the proposed acquisition of Link "Acquisition Agreement" the conditional agreement dated 14 January 2005, made between the Vendors and the Company providing for the Acquisition "Application Form" the white application form for use by Qualifying non-CREST Shareholders in connection with the Open Offer "Completion" completion of the Acquisition "Consideration Shares" the Initial Consideration Shares and the Further Consideration Shares "CREST" the system for the paperless settlement of trades and the holding of uncertificated securities operated electronically by CRESTCo in accordance with the Regulations "CRESTCo" CRESTCo Limited "Davy" J&E Davy, trading as Davy "Directors" or "Board" means the directors of Vislink "Disclosure Date" close of business on 13 January 2005, the last dealing day and latest practicable date prior to the publication of this announcement "EGM" or "Extraordinary the extraordinary general meeting of VislinkGeneral Meeting" convened for 11.00 a.m. on 9 February 2005 "Enlarged Group" the Group as enlarged by the acquisition of Link "EU" the European Union "Existing Ordinary Shares" the 102,072,848 Ordinary Shares in issue at the date of this announcement "Form of Proxy" the form of proxy for use by Qualifying Shareholders at the EGM "Further Consideration Shares" the new Ordinary Shares which may be issued to the Vendors as part of the additional consideration (if any) for the Acquisition pursuant to the Acquisition Agreement "Group" or "Vislink Group" the Company and its subsidiary undertakings as at the date of this announcement or any of them as the context requires "HD" high definition "Hernis" Hernis Scan Systems A/S, a company incorporated in Norway with registered number 953054086, which company operates the Group's specialist CCTV system business "Initial Consideration Shares" the 13,186,813 New Ordinary Shares to be issued to the Vendors as part of the initial consideration for the Acquisition "Investec" Investec Bank (UK) Limited "Investec Investment Banking" the investment banking division of Investec "Ireland" the Republic of Ireland and Irish shall be construed accordingly "Irish Stock Exchange" The Irish Stock Exchange Limited "Issue" the Placing and Open Offer "Issue Price" 22.75p per share "Loan Notes" the Series A Loan Notes and/or the Series B Loan Notes "London Stock Exchange" London Stock Exchange plc "MRC" Microwave Radio Communications, the Group's US broadcast business "New Ordinary Shares" the Open Offer Shares and/or the Initial Consideration Shares "OEM" original equipment manufacturer "Open Offer" the open offer by Investec on behalf of Vislink to Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price "Open Offer Shares" the 20,414,569 new Ordinary Shares which are to be made available to Qualifying Shareholders pursuant to the Open Offer "Ordinary Shares" or Vislink ordinary shares of 2.5p"Shares" each in the capital of Vislink "Placing" the underwritten conditional Placing at the Issue Price of 19,496,569 Open Offer Shares (subject to recall by Qualifying Shareholders to satisfy valid applications under the Open Offer) by Investec pursuant to the Underwriting Agreement "Proposals" the Acquisition and the Placing and Open Offer "Qualifying Shareholders" Shareholders on the register of members of the Company on the Record Date other than certain Overseas Shareholders "Shareholders" holders of Existing Ordinary Shares "UK" the United Kingdom of Great Britain and Northern Ireland "UK Listing Authority" the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 as amended from time to time "United States", "USA" or "US" the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia "Vendors" Leonard Graham Mann, David Mann, Charles Alred Baudouin, Michael Richard Joseph Budge, Roger Vaughan Davies, Michael John Melrose, John Greville Simmons, Francis Drudy, David Remnant, Barry Smith and Julie Vincent Ends This information is provided by RNS The company news service from the London Stock Exchange